Data Envelopment Analysis for establishing the financial benchmark of Korean hotels

In the wake of catastrophic natural disasters and rising threats of terrorism, the hotel industry has seen a decline in revenue and an increase in competition. To avoid a downward spiral, the hotel industry needs to develop more competitive business strategies in order to make its operations lean and robust. These strategies may include: customer relationship management, yield management, niche marketing and continuous improvement of financial health. The success of these strategies hinges on the ability of hotel managers to assess the financial efficiency of their hotel in comparison to competition. In an effort to help hotel management enhance its financial efficiency in an increasingly competitive hotel industry, this paper proposes a Data Envelopment Analysis (DEA), which develops a meaningful set of benchmarks that will dictate best practices and form a successful hotel business model. Using the examples of 39 international and regional hotels in Korea, this paper illustrates the usefulness of DEA for the continuous improvement of hotel business practice

A data envelopment analysis‐based balanced scorecard for measuring the comparative efficiency of Korean luxury hotels

Purpose This paper aims to develop a balanced scorecard for measuring the comparative efficiency of Korean luxury hotels and then set the benchmark of performance standards for Korean luxury hotels in the increasingly competitive hotel industry. It also aims to identify the root causes of inefficiencies and then propose ways to improve the competitiveness of Korean luxury hotels. Design/methodology/approach This paper proposes data envelopment analysis (DEA) to measure the comparative efficiency of six luxury hotel chains in Korea, relative to prior periods and their key competitors. In particular, this paper develops the Charnes, Cooper and Rhodes (CCR) model that is designed to derive weights without being fixed in advance. Also, the results of the CCR model with constant returns to scale were compared to those of the Banker, Charnes and Cooper (BCC) model with decreasing returns to scale. Findings The paper finds that the declining efficiency within some Korean luxury hotels coincides with more aggressive government crackdowns on bad bank loans in the wake of the International Monetary Fund (IMF) financial crisis and the slow adaptation of some hotels into ongoing hotel industry restructuring. The deep discount in hotel room rates did not necessarily lead to increased room occupancy. The revenue increase is not significantly correlated with the enhanced profitability of Korean luxury hotels. The Korean hotel industry reached the stage of market maturity and therefore the mere expansion of the hotel capacity would not necessarily enhance the hotel\u27s profitability. Originality/value This paper uncovers the financial weaknesses and strengths of the Korean luxury hotels and identifies challenges and opportunities for the Korean hotel industry. In addition, it helps Korean hotels formulate the future survival strategies by providing the detailed picture of where they stand in terms of competitiveness. This paper is one of the first attempts to utilise DEA to develop performance measures for hotels under the balanced scorecard framework. The proposed DEA can be easily modified or extended to similar settings in other hotels such as budget hotels or other countries such as USA and Japan

Triangular stochastic matrices generated by infinitesimal elements

summary:We show that each element in the semigroup $S_n$ of all $n \times n$ non-singular upper (or lower) triangular stochastic matrices is generated by the infinitesimal elements of $S_n$, which form a cone consisting of all $n \times n$ upper (or lower) triangular intensity matrices